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Strategic business alliances
Industrial marketing services
Koch Group has been providing industrial marketing services to small
and mid-sized manufacturers since the late 1960s. Starting in the mid-1990s,
we began to assist clients develop strategic business alliances. These
strategic alliances have focused on helping Koch Group clients either
supply or source specific products or components that are manufactured
to meet an existing design specification.
Koch Group consultants work with our clients so they can become a
supplier of components or products, or find a source for needed
products or components. In today’s economic climate of NAFTA competitors
and sourcing to China, these activities take on added importance to U.S.
manufacturers.
Developing customers
To assist our clients develop customers for specific families
of components or products, Koch Group consultants will:
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Define the range of products or components our clients can supply
to a specific industry or market segment.
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Identify and profile the users of these components or products based
on an agreed-upon specific set of criteria (Standard Industrial Classification
(SIC) code or North American Industrial Classification System (NAICS)
code, size, location, etc.).
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Qualify a selection of these users to determine their needs for specific
components, products, or production processes.
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Meet with selected companies to present and “sell” our
client’s ability to be a cost-efficient alternative to their
current vendors.
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Assist with contract negotiation, as required.
Finding a source for specific components
or products
To find a source for specific components or products, Koch Group
consultants will:
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Define the types of manufacturing industries that would typically
operate the manufacturing equipment or manufacturing processes required
to produce the required components or products.
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Identify and profile the potential sources of the required components
or products based on an agreed-upon specific set of criteria (SIC
code, size, location, or other.)
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Qualify by telephone, or by in-person interviews, a selection of
these potential vendor sources to determine their ability to efficiently
produce specific components or products.
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Meet with selected potential vendor companies to present the benefits
that will accrue to them by having our client become a valued customer
providing the potential vendor with additional cash flow and revenue.
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Assist with contract negotiation, as required.
Reasons for developing a supply alliance
A company should consider entering into a supply alliance if some, or
all, of the following conditions are satisfied, including:
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Excess capacity and labor exist and adding additional business, even
at lower than normal margins, will provide a significant positive
financial impact on overall profitability.
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A distinct, definable, competitive advantage exists in the company’s
ability to provide the required products or components such as geographic
location resulting in faster and cheaper transportation, purchasing
power resulting in lower material costs, and manufacturing efficiencies
that result in lower per part production costs.
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Existing production equipment matches the specific need with little
or no modification providing the supplying company with the ability
to supply products or components to a new market with minimal or no
investment in capital equipment.
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The supply alliance partner has the required distribution in place,
eliminating the investment and effort required to establish new distribution.
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The required components or products already have an established
customer base, reducing or eliminating the financial risks associated
with new market development.
Reasons for developing a sourcing alliance
A company should consider entering into a sourcing alliance if some,
or all, of the following conditions are satisfied. These conditions include:
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Ongoing demand for specific products or components is causing manufacturing
bottlenecks, excessive overtime costs, late deliveries resulting in
reduced operating margins and poor customer satisfaction.
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Sales are routinely being lost to competitors due to poor ship dates,
resulting in a loss of business or potential business and reduced
overall market share.
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Costs of adding equipment or manpower to produce the needed products
or components cannot be easily cost justified resulting in a potential
“lose/lose” situation for the company.
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The existing production facility cannot satisfy the additional equipment
and processes required to accommodate increasing demand resulting
in the opening of market opportunities to existing and potential competitors.
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Costs of products or components to be sourced are significantly less
than internal production costs, resulting in lost profitability and
the ability to reduce price to hold market share.
Alliance benefits
As competition for U.S. business increases, it is critical to suppliers
and end-users of components and finished goods products to become as efficient
and as resourceful as they can be to maintain and then grow their sales
and profitability. If strategic alliances are developed correctly, both
parties can benefit and both businesses can become more profitable.
Strategic alliance supply benefits
A company should consider entering into a supply alliance if some, or
all, of the following benefits can be achieved. These benefits include:
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Increasing utilization from existing equipment and labor, allowing
the company to obtain an increased rate of return on investment (ROI)
on equipment and labor, improving overall company profitability.
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Reducing the cost of research, development, and engineering required
to produce a new component or part allowing the company to add production
capabilities cost effectively and quickly since these products or
components probably have been fully researched, developed, and engineered
prior production.
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Reducing traditional marketing and selling costs by using the resources
and established distribution of the supply alliance partner to get
the products or components to the end-users resulting in a limited
number of customers to service and invoice for the additional production.
Strategic alliance sourcing benefits
A company should consider entering into a sourcing alliance if some,
or all, of the following benefits can be achieved. These benefits include:
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Adding significant production capabilities for “in demand”
components or products with limited or no investment capital equipment,
providing increased sales and profitability.
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Increasing the size of the workforce without encouraging additional
fixed operating expenses for insurance, benefits, taxes, and other
related overhead allowing the company to increase output as required
without the burden of increasing the workforce or workforce expenses.
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Establishing a known per-part or per-component cost by negotiating
a fixed cost with the sourcing alliance partner, allowing the company
to accurately forecast profitability and track costs.
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Preventing the internal production bottlenecks that would likely
result from producing the needed products or components internally
allowing the company to efficiently operate its current production
processes.
Entering into a sourcing alliance or supply alliance can significantly
enhance a manufacturer’s capabilities, sales, and profitability.
Koch Group has been offering industrial marketing services to our manufacturing
and industrial service clients for over 30 years. We have provided industrial
marketing solutions to manufacturers or industrial service providers operating
in a diverse breadth of industries, markets, and niches.
Learn more about our approach to industrial
marketing.
If you would like more information on our industrial marketing services
for manufacturers, or want some assistance in developing your marketing
plan, please use our contact
form, email us at info@kochgroup.com,
or call us at 630-941-1100 and we will be happy to discuss
your needs.
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Koch
Group, Inc.
240 East Lake Street, Suite 300
Addison, Illinois 60101
Phone: 630-941-1100
Fax: 630-941-3865
Email: info@kochgroup.com |
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